At the risk of harping on a theme, I continue to be frustrated by the unwillingness of Nova Scotia’s political, business and media elites to hold federal governments accountable for their contribution to the state that we are in. Granted, those elites tend to exaggerate the direness of our straits. As pointed out in earlier posts, levels of debt, deficit and public spending in the province hardly deserve the “now or never” rhetoric we have been subjected to over the last year or so.
But that doesn’t mean it’s all good. Employment in Nova Scotia in 2014 averaged 447,600, down 5,000 from the previous year and 9,700 below the average for 2012. Real GDP growth was zilch in 2012-13, housing starts dropped by 32% between 2012 and 2014 and as we get older faster than a lot of other industrialized locales federal health transfers are down. All of this has eroded provincial revenues, contributing to the swollen 2014-15 deficit that has provided talking points for the sky-is-falling crowd. So it’s not that we don’t have problems. It’s that by ignoring one of the major sources of those problems we may end up like Chicken Little and her pals.
This tendency to let the federal government off the hook was on display again in the weekend edition of the Globe and Mail. Canada’s self-proclaimed national newspaper gave three full pages in its Focus section to John Ibbitson’s re-hash of the stuff we have been hearing so much about since the Ivany report landed in our midst 13 months ago. In a piece entitled “The incredible shrinking region,” Ibbotson goes on and on about the stagnant economies of the Maritime provinces, with their out-migration of young people and their failure to replace the departed with international immigrants. Ibbitson makes the familiar (and over-simplified) argument that our present malaise is the result of federal tariff policies enacted back in 1879, followed 80 years later by well-meaning but ineffective federal efforts to compensate for past injuries through transfer payments and “economic development schemes” (read boondoggles). To those ancient transgressions Ibbitson adds new ones, like changes to the equalization formula and employment insurance. He then leaps illogically to the conclusion that because we don’t have many voters down here, the feds are justified in ignoring our problems.Instead, he leaves it to Maritimers to “act boldly to arrest their decline.”
Now, it’s one thing for John Ibbitson to give the feds a mulligan. After all, the Globe’s Ontario-based “writer at large” is also the co-author of The Big Shift, a 2013 book that celebrated the ascendancy of voters in western Canada and the suburbs of Toronto – believers in “success through independence and hard work” – over the concerns of us denizens of “the brackish backwaters of decline” east of the Ottawa River. However, it’s another matter when our own mucky-mucks constantly do the same thing. Ray Ivany is cited in Ibbitson’s piece (along with academic Donald Savoie and the new head of AIMS) as subscribing to the notion that, as Ibbitson puts it: “Maritimers must understand that Ottawa never was and cannot be the solution to the region’s problems.”
Really? Let’s look at those problems, starting with immigration. On that score, Ray Ivany’s famous report was not as unequivocal as the Ray Ivany presented in Ibbitson’s piece. The report did give some credence to the notion that we don’t have enough immigrants because some Nova Scotians are not welcoming (a questionable proposition given the inverse relationship between immigration numbers and hostile popular attitudes in countries like Britain, France, Germany etc.) . But the report also pointed out that “inflexible federal policies on immigration quotas and categories” were a problem for Nova Scotia in attracting more immigrants. We haven’t heard much about those inflexible federal policies in the past year or so, but we can regularly expect dispatches about people like Ibbitson’s Carol, a 70-year-old woman he encountered in a mall food court, worried about immigrants taking jobs from the locals. So the lack of immigration is our fault, especially Carol’s, not the result of federal policies or a national economy that fails to provide equal opportunity from coast to coast to coast? Maybe not.
And what about that national economy? Surely the federal government has some responsibility for it. The Ivany report went out of its way, cooking some numbers, to show us how bad the Nova Scotia economy has been over the last 20 years. In fact, it hasn’t been as bad as they claimed. Admittedly, it has been the pits the last couple of years, but there are better days ahead. Why? For one thing, the petro-economy which drove up the dollar and hurt our exports, is in a slump, taking the dollar down with it. With the lower dollar, the economic forecasters are calling for some bounce-back in our exports. And with the ship-building contract about to kick in, there will be a big increase in private sector jobs. Those jobs will be paid for with federal tax dollars, and will replace some of those those public sector jobs that disappeared because of recent federal cuts to the civil service. What goes around comes around, as they say. Federal policy, oil prices and global economics contributed to our recent malaise and those factors may also contribute to the anticipated recovery. To suggest the federal government has no responsibility for economic conditions in the Maritimes makes no sense.
Lastly, there are the changes to the equalization formula affecting health transfers, a serious problem caused directly by the federal government. As readers of this blog will know, the Harper government’s notion of fairness is on full display this year as Alberta enjoys a 38% increase in health funding from Ottawa while Nova Scotia gets 2%. This is the result of the feds imposing equal per-capita cash transfers for health, a move that wiped out a formula introduced in the 1970s that recognized that a tax point transferred by the federal government is worth less in poorer provinces than in wealthier ones. The tax point transfer was not some sort of gift from the feds. It was in lieu of a portion of federal cash payments that had previously been made on an equal per capita basis. To ensure that those tax points plus the remaining cash would continue to provide equal funding to provinces over the years, the feds adjusted the cash amounts. Wealthier provinces like Alberta,whose tax points were worth more than the national average, received less cash. Nova Scotia and the other have-less provinces, received more cash – called associated equalization- to bring the combined value of their tax points and cash to the national average.
But that was then. Nowadays, we are told to forgot about the unequal value of tax points and to define fairness as equal per-capita cash transfers to every province, period. Alberta’s 38% increase for 2014-15 was to bring its per capita cash transfer up to the same level as other provinces. The increase was paid for by skimming off the increases to other provinces for that year, which is why Nova Scotia got a 2% increase rather than the normal 5%-6%. (For more of the gory details, read my post from Dec. 24, 2014 and for an even fuller account check out my book, Equal as Citizens at http://www.formaclorimerbooks.ca/Book/2630/Equal-as-Citizens.html.) Despite the obvious unfairness, the government and its private sector allies have been silent, likely because acknowledgement of the heist would interfere with their campaign to deal with health funding problems by putting a lid on the wages of health care workers – a treatment with unknown side effects.
The health funding rip off of 2014-15 is not a one-time-only event, far from it. From now on, each province will get the same amount of health cash per capita from Ottawa, with increases of 6% for next year and the year after, dropping to 3% in 2017-18. But for all provinces except Alberta, those increases will be calculated on a funding base diminished by this year’s shenanigans. Worse, the move to per-capita health transfers also eliminated associated equalization, which effectively means cuts in health transfers for Nova Scotia in the foreseeable future.
The Broten report on tax and regulatory reform, released last November, included a table setting out in some detail the impact of the elimination of associated equalization on Nova Scotia’s health transfers. It shows that in the coming fiscal year, a $50 million cash increase will be partially offset by a $23 million loss in tax point equalization. So while the Harperites will hit the campaign trail this year claiming to have increased health funding by 6% in 2015-16, the real increase in Nova Scotia will be $27 million, or about 3%, following on that 2% increase in 2014-15.
In 2017-18, with today’s 6% annual increases scheduled to drop to 3% for everyone, the loss of associated equalization will actually mean a funding cut for Nova Scotia and other provinces which have been receiving tax point equalization. The Broten report’s table shows that in 2017-18 the projected $31 million increase in cash to Nova Scotia will be more than offset by the $41 million reduction in tax point equalization. Over the full eight years covered by the table, per capita cash increases total about $312 million, while the losses from tax point equalization are almost three times that – $775 million. Add to that the effects of inflation and an aging population and any notion of Nova Scotia being able in the future to provide health care that meets national standards appears far-fetched.
The Broten report did not go into detail on that sobering picture, not surprising given that Laurel Broten herself served in the Ontario cabinet under PremierDalton McGuinty, a man who campaigned ferociously against the continuation of equalized tax points for health. The report that bears her name helpfully included the table from which these my calculations are drawn, but that table seems almost to have been smuggled in. There is no discussion of the ramifications for Nova Scotians of what is, at best, a freezing of federal health transfers to be followed by actual cuts. And no resistance either. “Nova Scotians should have no illusions that the federal government will solve our financial woes, ” says the report. ” In fact the reality is quite the opposite.”
Well yes, perhaps we should have no illusions about the current Conservative government and its willingness to solve the fiscal problems it is causing for Nova Scotia and other provinces. But the “reality” that the Broten report, and the Ivany report before it are asking us to accept is that of Stephen Harper – Foxey-Loxey to our Chicken Littles – with a touch of Ontario-think thrown in via the likes of Broten and Ibbitson. But there is a federal election coming soon, giving voters down here an opportunity to challenge that version of reality. The challenge should start with the premise that the federal government and all provinces have a constitutional responsibility (Section 36 of the Constitution Act) to “ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.” If our current crop of political and business leaders refuses to make that case, it will be up to citizens to break the silence and hold the federal government accountable. That, or accept second class status within Canada.